A struggling dad built an app to buy his kids cheaper pizza — and now his company has 5 million downloads and $40 million

Ryan Hudson is the cofounder of Honey, a browser
extension that tracks prices and finds online coupons.

Honey got off to a rocky start, unable to persuade
investors of its value.

Today, Honey's browser extension has been
downloaded over 5 million times, the team just crossed 100
people, and investors have provided over $40 million.

Over five years ago, Ryan Hudson went online to order a
pizza — dinner for his two kids, who were then under 6 years
old.

He really wished he had a coupon.

Money was tight for the serial entrepreneur, and cost-saving
measures were nothing new: He had recently called up every one of
his utility providers, from his cable company to his internet
provider, to cut $200 from his bills every month.

"That's part of why I was in a couponing mindset when I was
buying that pizza," Hudson told Business Insider. "I thought,
there's probably a coupon that could save me $1, and that matters
right now."

That night, after the kids went to bed, he put together a
prototype for a browser extension that could help solve his
problem. In October 2012, the MIT-trained entrepreneur, along
with co-founder George Ruan, used that prototype to
build and launch Honey, a web browser extension
that automatically finds and surfaces coupons when a user is
online shopping.

For two and a half years, Hudson and his Ruan bootstrapped
their app, unable to convince investors to put money into a
desktop browser extension as consumer interest moved to mobile.
In 2013, Hudson ran out of money, and took a day job as a product
manager at an ad tech company to pay the bills.

"I worked there for a year and learned a lot about the ad tech
industry and building products at massive scale," he
said, "but I also learned that in my core, I'm still an
entrepreneur, and I like to build things. Even when I was
there, it was gnawing at me that I wasn't trying to figure
out to make this Honey thing work."

As Hudson stepped back and Ruan continued working with a skeleton
crew, users continued to gravitate to Honey, based on
the recommendations of friends — and a leaked Reddit post from
one of its beta testers. In the failed startups that
preceded Honey over the course of Hudson's career, he said,
"nothing had ever clicked, but to have something consumers
clearly loved that was growing organically by word of mouth
because people actually loved the product, I knew that there was
something there."

When Honey starting growing, it moved fast

Today, Honey's browser extension has been downloaded over 5
million times on Chrome, Safari, and Firefox and the team
just crossed 100 people. The extension automatically
finds and applies coupons at more than 21,000 stores,
and members can earn rewards at more than 3,700 of those.
Honey has saved its users — 67% of whom are millennials
— over $170 million from coupon code discounts this year so
far.

The
LA Times reported in October that Honey has raised over
$40 million in funding, including $26 million that went
unreported in a March Series C round. Hudson says Honey
is currently profitable, but does not disclose revenue.

Honey isn't just the coupon codes anymore: The app partners with
retailers to provide coupons and offer "Honey Gold" — its version
of 1%-2% cash back — on verified purchases. In addition to
scouring the internet for coupons during checkout (you can see
how that works in a
previous Business Insider article) and providing Honey Gold,
it has also added features such as a price-comparison element
between different seller on Amazon, a "Drop List" that tracks
price changes on Amazon — in November, this feature will be
expanded to retailers including Target, Loft,
Saks, and Macy's — and a travel element that offers
discounted prices for hotel stays. It has a 4.8 out of 5 stars in
the Chrome store.

Honey has so far chosen not to monetize its product everywhere it
could — for instance, Hudson pointed out, a price-comparison
toolbar "would monetize insanely well" but it makes for an
annoying consumer experience. Honey provides the Amazon Drop List
feature without monetization, although it has affiliate
relationships with some of the sites included on its expanded
Drop List. Because the founders consider user
experience paramount, "there are a lot of things that would make
money in the short term that we don't do," he said.

The trick was appealing to retailers along with consumers

Honey's driving force, thanks to Hudson's cofounder Ruan, has
been consumer psychology. "For two and half years we couldn't
figure it out, and we couldn't make money," Hudson said.

But eventually, the co-founders realized that the service was
just as beneficial to retailers as to shoppers: "We take a
consumer who wants to check out and give them the confidence to
do so," he said. "Prior to using Honey you see a coupon code
box and think there's probably a deal out there somewhere, and
you open a tab and search codes and start clicking on
links, and in that process, you never get a definitive
answer — it's hard to do an exhaustive search.
What Honey does is takes that consumer in checkout flow who
wants to buy and says, 'Hey, we just tested all these codes and
we picked out one that works.' It's like winning the lottery, and
it makes consumers more likely to interact."

One of the app's more counterintuitive findings is
that even when there isn't a coupon that works available, the
shopper is still more likely to buy after running the codes
through the app — they're seeking the validation of knowing they
tried.

Honey will keep going at full-tilt

When asked for advice for other entrepreneurs, Hudson said it's
crucial to manage your own psychology during the roller coaster
ride that is a startup. "Everything is going to be
infinitely harder than you expect," he said.

He's seen people paralyzed by the knowledge that something isn't
working, but instead of addressing it head-on, they bury that
fact. "Fundraising almost forces you to do this in a lot of ways,
where you're highlighting the potential and drinking your
own optimism Kool-Aid," he continued. "That's
great in selling investors, getting people to join the
company, and building enthusiasm for what you're doing,
but the tricky part is balancing it with reality, and deciding
what to focus on as a result of that reality."

Hudson will continue to go all-in on Honey, the startup he could
stop thinking about even when he wasn't working on it. "The fear
has always been don't f--- it up, because this is something
special," he said. "This is the company that can matter to the
world. It's almost an obligation and a responsibility to do it
right."